Globalisation
What is globalisation?
Globalisation is economies becoming more connected through trade, investment, migration and the spread of firms across borders.
trade across countries is not new, but modern globalisation is much faster and wider.
a more global economy means:
— more goods and services traded internationally
— more investment flowing between countries
— more movement of labour
— more firms operating in multiple countries
Why trade abroad?
firms look for:
bigger markets
access to resources
lower cost ( e.g. labour costs lower in China)
—> all leads to higher profits
countries trade because they cannot efficiently produce everything themselves.
trade allows specialisation → higher productivity → lower average cost → wider consumer choice
Examples
M&S moved from mainly UK manufacturing towards imported clothing as global supply chains expanded.
Jimmy Choo grew by selling in many countries, not just its home market.
Exam skills
When asked “How did globalisation happen?”, avoid just defining it.
Build a chain:
lower barriers / lower costs / open markets → more trade and investment → greater interdependence → globalisation
What caused globalisation to speed up?
trade liberalisation:
governments reduced tariffs, quotas and other barriers→ this made imports cheaper and exporting easier→ resulting to more international competition and more cross-border trade
capital market liberalisation :